Clash of The (Geopolitical) Titans

Thucydides Trap Variant

In ancient Greece, Thucydides (rhymes with Euripides) watched Sparta's fear of a rising Athens turn diplomatic theory into military practice.

The insight that anxiety over a new power’s ascent can tip fragile balances (and egos) toward conflict resonated across the ages (and dynasties).

Fast-forward two and a half millennia, and Harvard's Graham Allison rebranded this ancient anxiety as "the Thucydides Trap" in 2017.

Plot twist: while theorizing about Chinese influence, the Chair of the Chemistry and Chemical Biology department was secretly on CCP payroll – through Wuhan University no less – before being caught crimson red-handed.

By studying sixteen historical cases of rising versus ruling powers, Allison found that twelve ended in war.

It quickly became a keynote’s favorite talk track and conference cliche from Davos to the World Economic Forum (WEF), and other hubs for “thought leaders” to traffic in useless platitudes and low-calorie slogans masquerading as insights.

But reality, permanently blacklisted from the corporate kumbayas and narcissism laundromats of Davos, suggests a different story.

Today's China battles mathematics: declining births, climbing debt, and multiplying dissent.

Meanwhile, America's writing its comeback story: reshoring supply chains, supercharging semiconductor production, and forging (or forcing) alliances that cement its global power.

China, once widely viewed as an unchallenged ascendant force, may now be peaking, while America, presumed to be on an irreversible decline, is finding renewable energy.

Like a pathogen evolving under pressure, great power competition mutates.

But this strain has an unexpected host preference.

This is the Thucydides Variant™.

Demographics + Debt = Destiny

Beijing’s sprint from agrarian poverty to near-global industrial dominance seemed tailor-made for the Thucydides Trap—the reigning superpower growing wary of a “rising” challenger.

But that once-inevitable trajectory may be on its way to becoming all chop, no stick.

If birth rates and a robust working population are the lifeblood of an economy, China would need transfusions as frequent as Bryan Johnson.

The problem?

Not enough kids to suck the blood out of.

In 2022, deaths outpaced births for the first time since the era of Mao’s Great Leap Backwards.

By 2035, one in three Chinese citizens could be 60 or older.

Xi’s answer?

Work (even) more.

And not just at work, either.

The CCP is pushing retirement age north of 60 while its former one-child enforcers now play communist Cupid, knocking on doors to ensure citizens aren't just sharing Xi Jinping Thought, but also their genetic code.

But remedying a problem child policy won’t help.

Debt Laden Junk Bond Diplomacy

There’s no cheating the (demographic) reaper, especially when leveraged like a crypto day trader operating from their grandmother’s basement in Iowa.

GDP growth has three recipes: flog products to foreigners offshore until AfterPay cuts them off Shein (exports), retail therapy at national scale (consumption), or toss money at government projects like a CCP comrade at a Macau baccarat table (investment).

Loving a government funded junket, China’s investment share of GDP sits at 43%, nearly double what advanced economies maintain.

Post-pandemic, it funneled cash into more ghost cities and highways to nowhere.

The outcome?

By 2024, China’s total social financing (TSF)—a broad measure of credit in the “real” economy — shot to 303% of GDP (which itself has stalled its growth as a % of US GDP).

Turns out “if you build it, no one will come”.

That’s especially true if your immigration policy tilts more toward ethnic cleansing than attracting fresh talent.

To make matters worse, investor confidence has gone from wavering, to waving goodbye.

Meanwhile, the U.S. is quietly retooling, with new supply chain strategies, a domestic tech renaissance, and a stock market that’s showing surprising resilience.

The Republic Rises (Again)

Preference falsification has run amok in the (Divided States of) America. Loud mobs dominating (and creating) the narrative may insist the nation is imploding, but the favorite language of America (money) tells a different story.

Markets are different to mobs in many ways not least because people and investors vote with their wallets and not their public appearances (Bill Ackman aside), they are constantly adapting and incorporating information, in real time, all the time.

And what are they saying (screaming) right now?

America’s back, baby.

U.S. equities account for 65% of the global stock market, an all-time high—more than 11 times that of Japan, the next-largest by market cap at 5.6%.

In fact, the U.S. now makes up 75% of the MSCI World Index, a 55-year peak.

So, what to do next?

Simple: Counterposition.

We win by embracing Western values.

They put founders on house arrest; we house them.

They isolate behind firewalls; we expand bandwidth across borders.

They rely on government investment; we entrust it to the free market.

Stay inspired,

Daniel

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